Monday, July 18, 2011

The way to improve quality in America's health care system is pay for performance. This model assumes most, if not all, providers are extrinsically motivated. The only reason they aren't providing optimal care now is the money incentives are wrong. Let's look at who is motivated by money, by material rewards:.

Aric Rindfleisch of the University of Arizona and James Burroughs of Rutgers University found that while "people who are more materialistic tend to be unhappy with their lives."

"Studies have found that burnout and dissatisfaction influence patient compliance, patient satisfaction with their medical care, and quality of care. ... On a personal level, burnout has been shown to relate to suicidal ideation among both physicians and medical students and may contribute to other personal problems such as substance abuse and broken relationships. Burnout is also associated with malpractice suits and turnover which can create substantial cost to hospitals and practice groups."

So the people most likely to be motivated by dangled rewards are the unhappy materialistic. Dissatisfaction leads to quality problems, which rewards are intended to address.

Extrinsic motivators are very powerful in the short run and can improve performance on simple tasks within the control of an individual. Add complexity and interdependence and extrinsic motivators perform worse than no reward scheme. The problem with extrinsic motivators is they kill people's intrinsic desires to learn and improve.

The move toward pay for performance started under President George W. Bush, who ironically thought doctors had the time to negotiate price with patients holding health savings accounts. This seemed a poor use of valuable professionals' time.

President Obama will bring pay for performance to life in a Frankenstein fashion. He wants to reward doctors for their performance on measures, sometimes two years old. That's asking doctors to drive using their rear view mirror. Things get worse inside Medicare's Rube Goldberg P4P scheme for accountable care organizations..

Co-management companies enable physicians to hold leadership positions that are designed to influence and improve day-to-day clinical management and operations. Participating physicians buy shares in a separate management company (usually an LLC) along with the hospital which allow an equal or controlling interest. The new "Comanagement company" (LLC) is then contracted to provide management oversight and services for the defined parameters of the hospital service line.

Management fees? How long before they seek preferred taxation, like carried interest? The big money men are in health care and the system will be much worse and more expensive for it. In my next post I'll examine the roots of health care P4P. It's straight from the corporate board room.